High inflation trend haunting retail business

JAKARTA. The inflation rate in January 2017 hit the level of 0.97%. Based on the record of National Statistic Agency (BPS), this is the highest inflation rate during the last three years.

The high inflation rate in January 2017 was driven by the government’s policy in increasing the tariffs of Motor Vehicle Registration (STNK), as well as the decision of PLN (State Owned Electricity Company) to increase the electricity tariff. The inflation rate was also driven by the increases in the food materials price, mainly bird’s eye chili.

The retail businessmen expect that the high inflation rate as much as 0.97% will not interrupt their businesses.

Recently, the high inflation rate has not affected to the retail business. For an example, PT Ramayana Lestari Sentosa claimed to secure a sales growth during 2017. According to Investor Relations of PT Ramayana Lestari Sentosa Aloysius Sentosa, the sales in January grew by 4%.

In order to maintain the sales rate, Ramayana will conduct massive promotions, while preventing price volatility.To date, the outlets in Sumatra and Kalimantan are the mainstays of Ramayana to maintain the sales growth. Understandably, about 49% of Ramayana’s outlets are located in outside of Java.

He also expects that some regions, which depend on commodities such as palm oil, rubber, and coal, will have economic improvements.

In order to maintain the sales growth, Ramayana will open four to six additional outlets in outside of Java. Aloysius expects that the expansion may create about 9%-10% business growth in 2017.

The prices may increase

The similar strategy would be applied by Transmart Carefour. The retail company, which is under the business flag of Trans Corp will offer discounts to attract consumers. "We have to maintain the purchasing power, while creating opportunities,” said Satria Hamid, General Manager Corporate Communication of PT Trans Retail Indonesia.

Meanwhile, the high inflation rate has brought significant impacts to the sales of Hypermart and Foodmart in Jakarta. However, managements of the retailers are more focusing on the outlets, which are located outside Greater Jakarta area.

"To date, we are monitoring the impacts (of the high inflation rate), as they will affect to other business sectors,” said Director Corporate Communication of PT Matahari Putra Prima Tbk (MPPA) Danny Kojongian.

Danny said, the retailers play an intermediary role between producers and consumers. Therefore, the retailers will adjust the production costs to the sales prices. “On the other hand, we also try to negotiate the prices with the producers,” he said.However, if the production costs increase, the retailers will raise the sales prices to balance the demands and supplies of goods.(Muhammad Farid/Translator)